Your Banking Relationship Matters: What to Look for in a Partner

Recent bank failures have sent shockwaves through the country, and the fallout has put a spotlight on financial services as an industry. Some business leaders are questioning whether they’ve done enough to ensure their money is secure. While it’s challenging to say whether these events were inevitable, one undeniable truth is that a strong relationship with your banking partner ensures that your company has transparency into the strength of your bank and enables you to constantly evaluate how to safeguard against threats like fraud or market volatility.

When there is turmoil, you should be able to turn to your relationship manager for honesty and sound counsel that is in the best interest of your business. When it comes to protecting the profits you’ve worked hard to earn for your business, a banking partner that’s trustworthy and reliable can mean the difference between stress and peace of mind. (Full disclosure: my bank offers commercial banking services, but you have many options in this space.)

In the wake of recent events, you may be re-evaluating your current banking relationship or considering the prospect of a new one. If so, below are three key factors to consider.

1. Your Banking Partner Should Have a Well-Rounded Model.

A diversified bank is a healthy one — and something you should look for in a banking partner. Too much focus on a single industry or a questionable credit history can be warning signs of instability. Some questions you can ask a prospective banking partner include:

• Can you provide me with an overview of your asset mix?
• Can you share a list of industries your bank serves?

You can also always review key information either on the FDIC website or in your bank’s quarterly or annual reports, including deposit growth, percentage of non-current loans to total loans and the bank’s available capital.

2. Look for Accessibility of Cash.

If you end up needing cash to cover a necessary expense on short notice, your banking partner’s liquidity will be crucial. This is something I had many conversations around during the pandemic: when there is an unexpected impact to sales or operations, it is critical that you can easily access capital to keep operations in motion.

Other options for easy access to capital are money market accounts, which can provide ready cash if needed. A trustworthy banking partner will guide you on which options are best for you and your business, and will provide sound advice on how best to manage and improve your cash flow.

3. Know Your Banker as well as Your Bank.

This may arguably be the most important and least discussed piece of banking advice. The reputation and financial standing of your banking institution is important, but you should also know and trust your banker. This includes learning more about their past experience and potentially speaking to referrals.

First and foremost, your banking partner should be accessible and able to offer expertise on your business’ growth — even in challenging times. This also means they should have knowledge of your region and your industry; familiarity with both can lead to a stronger relationship, as well as provide greater peace of mind that your business is in good hands.

Final Thoughts

There are many lessons to learn from all that transpired over the past few months, but these events have also highlighted key qualities business leaders should look for in their financial partners to ensure that their relationship is built on transparency, dependability and trust.